Correlation Between EverQuote and Cheetah Mobile

Can any of the company-specific risk be diversified away by investing in both EverQuote and Cheetah Mobile at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining EverQuote and Cheetah Mobile into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between EverQuote Class A and Cheetah Mobile, you can compare the effects of market volatilities on EverQuote and Cheetah Mobile and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in EverQuote with a short position of Cheetah Mobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of EverQuote and Cheetah Mobile.

Diversification Opportunities for EverQuote and Cheetah Mobile

-0.58

Correlation Coefficient

EverQuote  Cheetah Mobile

Excellent diversification

The 3 months correlation between EverQuote and Cheetah is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding EverQuote Class A and Cheetah Mobile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheetah Mobile and EverQuote is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on EverQuote Class A are associated (or correlated) with Cheetah Mobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheetah Mobile has no effect on the direction of EverQuote i.e., EverQuote and Cheetah Mobile go up and down completely randomly.

Pair Corralation between EverQuote and Cheetah Mobile

Given the investment horizon of 90 days EverQuote Class A is expected to under-perform the Cheetah Mobile. But the stock apears to be less risky and, when comparing its historical volatility, EverQuote Class A is 1.49 times less risky than Cheetah Mobile. The stock trades about -0.04 of its potential returns per unit of risk. The Cheetah Mobile is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  363.00  in Cheetah Mobile on September 2, 2024 and sell it today you would earn a total of  215.00  from holding Cheetah Mobile or generate 59.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

EverQuote Class A  vs.  Cheetah Mobile

EverQuote Class A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EverQuote Class A has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Cheetah Mobile

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cheetah Mobile are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Cheetah Mobile displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EverQuote and Cheetah Mobile

The main advantage of trading using opposite EverQuote and Cheetah Mobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EverQuote position performs unexpectedly, Cheetah Mobile can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Cheetah Mobile will offset losses from the drop in Cheetah Mobile's long position.

The idea behind EverQuote Class A and Cheetah Mobile pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.